What You Need to Know About the BOIR Form for Legal Purposes?

In the United States, businesses are constantly facing new regulatory requirements aimed at increasing transparency, accountability, and security within corporate structures. One such requirement is the Beneficial Ownership Information Report (BOIR), which is a critical tool for identifying and disclosing the individuals who ultimately own or control a company.

Introduced as part of the Corporate Transparency Act (CTA), the BOIR form is intended to enhance financial transparency and prevent illicit activities like money laundering, tax evasion, and fraud. The BOIR form mandates that certain entities submit beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), helping law enforcement and regulators track ownership structures more effectively.

This article will explore everything you need to know about the BOIR form for legal purposes, from who needs to file to the information required, and why it’s so important for businesses and legal professionals to understand and comply with this new regulation.

What is the BOIR Form?

The Beneficial Ownership Information Report (BOIR) is part of a broader effort under the Corporate Transparency Act (CTA), passed in January 2021. The form requires certain entities—primarily corporations, limited liability companies (LLCs), and similar entities—to report their beneficial owners to the U.S. government. Beneficial owners are individuals who ultimately own or control the company, whether directly or indirectly, through share ownership or other means of control.

The BOIR aims to increase the transparency of business ownership in the U.S. and combat illegal financial activities. The data collected is stored by FinCEN, which is part of the U.S. Department of the Treasury, and accessible to law enforcement, financial institutions, and other regulatory agencies.

Who Needs to File the BOIR Form?

The BOIR form is required for most domestic corporations, LLCs, and similar entities that are created or registered in the U.S. However, there are exemptions for certain types of companies. Businesses that qualify for the following exemptions are not required to file the Beneficial Ownership Information Report:

1. Large Operating Companies: If your business has more than 20 full-time employees, generates over $5 million in annual revenue, and has a physical office within the U.S., you may be exempt from the filing requirement.
2. Regulated Entities: Businesses that are already heavily regulated, such as banks, insurance companies, credit unions, and registered investment companies, are also exempt from the BOIR filing.
3. Inactive Entities: If your business has no assets or operations for at least 12 months and is considered inactive, it may not need to file the BOIR form.

Despite these exemptions, the BOIR applies to most small and mid-sized businesses, which means that many organizations will need to file the report by the specified deadline.

What Information is Required on the BOIR Form?

The BOIR form collects important information about the beneficial owners of a company. Beneficial owners are individuals who own or control 25% or more of the company or have significant control over its operations, management, or decision-making. The following information must be disclosed for each beneficial owner:

1. Full Legal Name: The complete legal name of the individual.
2. Date of Birth: The individual’s full date of birth.
3. Residential Address: The individual’s current residential address, not a business address.
4. Identification Number: A unique identification number issued by a government authority. This can include a passport number, driver’s license number, or other government-issued ID.
5. Nature of Ownership or Control: A description of the individual’s ownership interest or control over the company. This can include details on how they control the company, such as through voting rights or other means of influence.

If the business is owned or controlled through intermediary entities (such as trusts or other companies), the reporting entity must also provide information about the individuals who ultimately control those entities.

Why Is the BOIR Form Important for Legal Purposes?

The BOIR form has significant implications for legal professionals, businesses, and regulators. Here’s why it’s important for legal purposes:

1. Ensures Corporate Transparency

The BOIR promotes transparency in business ownership, ensuring that the true owners of a company are identified and documented. Before this legislation, shell companies and complex ownership structures were often used to obscure the identity of the true owners, making it difficult for law enforcement agencies to track down those responsible for illicit activities.

By requiring businesses to disclose their beneficial owners, the BOIR form ensures that bad actors cannot hide behind anonymous corporate structures. This transparency is crucial for both legal and financial institutions seeking to maintain the integrity of the U.S. financial system.

2. Prevents Financial Crimes

A core reason for implementing the Corporate Transparency Act and the BOIR form is to reduce the risk of financial crimes such as money laundering, tax evasion, and terrorism financing. By requiring businesses to disclose their beneficial owners, the government makes it harder for criminals to conceal their identities and assets behind shell companies or complex ownership structures.

For legal professionals, this is an opportunity to ensure that your clients are in compliance with these regulations and are not inadvertently involved in illegal activities. Failing to comply with BOIR filing requirements or submitting false information could expose businesses to legal and financial risks, including fines, penalties, and criminal charges.

3. Mitigates Liability for Businesses

Non-compliance with the BOIR form can lead to serious penalties. Businesses that fail to file the required Beneficial Ownership Information Report or fail to update their filings when ownership changes can face fines of up to $500 per day. Additionally, providing false information on the form can result in criminal penalties, including fines up to $10,000 and possible imprisonment.

Legal professionals can help their clients avoid these penalties by ensuring that all required information is accurate, up-to-date, and submitted on time. This reduces liability for businesses and helps them stay on the right side of the law.

4. Facilitates Legal Due Diligence

The BOIR also aids in legal due diligence. When conducting background checks, mergers, acquisitions, or other legal transactions, knowing the true owners of a business is crucial. The BOIR form makes it easier for legal professionals to access accurate ownership information, which can be vital when evaluating potential risks in business deals or disputes.

Additionally, the BOIR helps legal teams ensure that their clients are not inadvertently doing business with organizations that have hidden ownership structures or are involved in illicit activities. In this way, the BOIR provides valuable information for making informed, legally sound decisions.

How to Comply with the BOIR Form

If your business is required to file the Beneficial Ownership Information Report, you must ensure that all beneficial ownership information is correctly disclosed. Here’s how to comply with the BOIR requirements:

1. Identify All Beneficial Owners: Determine who qualifies as a beneficial owner in your company, including individuals with significant ownership or control.
2. Gather the Required Information: Collect the necessary information for each beneficial owner, including their name, birthdate, address, and identification number.
3. Register with FinCEN: Before filing, your business must register with FinCEN, the Financial Crimes Enforcement Network, to access the necessary filing forms.
4. Submit the BOIR Form: Submit the BOIR form online through the FinCEN portal before the filing deadline. Ensure all information is accurate to avoid penalties.
5. Keep Records Updated: If there are any changes to your company’s ownership structure, make sure to update the BOIR within 30 days of the change.

Conclusion

The BOIR form is an essential part of the Corporate Transparency Act and represents a significant step forward in promoting business transparency in the United States. Legal professionals, business owners, and compliance officers must understand the requirements and ensure that they meet all filing deadlines.

Failing to comply with the BOIR can lead to costly penalties and legal risks, so it’s crucial for businesses to stay informed, collect the necessary information, and submit the form accurately. By doing so, businesses can avoid fines, reduce liability, and contribute to a more transparent and secure financial system in the U.S.

For more information on the BOIR form and how to navigate the filing process, visit BOIR.org today.